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Item 1.01
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Entry Into A Material Definitive Agreement.
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On July 30, 2020, PropTech
Acquisition Corporation, a Delaware corporation (“PTAC”), entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with PTAC Merger Sub Corporation, a Delaware corporation and wholly-owned subsidiary of
PTAC (“Merger Sub”), Porch.com, Inc., a Delaware corporation (the “Company”), and Joe Hanauer,
in his capacity as the representative of all Pre-Closing Holders (as defined in the Merger Agreement) (the “Holder Representative”).
Pursuant to the terms
of the Merger Agreement, a business combination between PTAC and the Company will be effected through the merger of Merger Sub
with and into the Company, with the Company surviving as the surviving company and a wholly-owned subsidiary of PTAC (the “Merger”).
Once effective, all equity securities of the Company will be converted into the right to receive the applicable portion of merger
consideration pursuant to the terms and subject to the conditions set forth in the Merger Agreement, as more fully set forth under
“Consideration” below.
Consideration
Under the terms of
the Merger Agreement, the aggregate consideration to be paid in the Merger is $471,500,000, as adjusted in accordance with the
terms of the Merger Agreement, and apportioned between cash and Class A Common Stock of PTAC, par value $0.001 per share (“PTAC
Common Shares”), as more specifically set forth therein. In addition, PTAC will issue to the Pre-Closing Holders an
aggregate 5,000,000 restricted PTAC Common Shares as more particularly described under “Earn Out” below.
At the effective time
of the Merger (the “Effective Time”), (a) each share of Common Stock, par value $0.01 per share, of the Company
(“Company Common Stock”) that is issued and outstanding immediately prior to the Effective Time (other than
dissenting shares, Company Restricted Shares (as defined in the Merger Agreement), and shares of Company Common Stock, if any,
held in the treasury of the Company) will be canceled and converted into and become the right to receive the applicable portion
of the total merger consideration in accordance with an allocation schedule to be provided by the Company (the “Allocation
Schedule”) that will set forth the allocation of the merger consideration and Earn-Out Shares (as defined below) among
the pre-closing holders of the Company, and (b) each warrant to purchase Company Common Stock or preferred stock, par value $0.01
per share, of the Company (“Company Preferred Stock”) (other than Underwater Warrants (as defined in the Merger
Agreement)) that is unexercised and outstanding immediately prior to the Effective Time will be canceled and converted into and
become the right to receive the applicable portion of the total merger consideration in accordance with the Allocation Schedule.
In addition, as of
the Effective Time, (i) each option to purchase Company Common Stock (“Company Option”), whether vested or
unvested, that is outstanding immediately prior to the Effective Time and held by a Pre-Closing Holder who is providing services
to the Company immediately prior to the Effective Time, will be assumed and converted into an option with respect to a number
of PTAC Common Shares in the manner set forth in the Merger Agreement, and each such active employee of the Company (“Employee
Earn Out Recipient”) who is a Pre-Closing Holder who holds a Company Option will receive such holder’s allocation
of the Earn Out Shares (subject to a continuous employment requirement), (ii) each Company Option that is outstanding at such
time and held by a pre-closing holder who is not then providing services to the Company will be converted into a number of Company
Common Shares in the manner set forth in the Merger Agreement, (iii) each award of restricted stock units with respect to shares
of Company Common Stock (“Company RSUs”) that is outstanding immediately prior to the Effective Time will be
assumed and converted into the right to receive an award of restricted stock units denominated in a number of PTAC Common Shares
in the manner set forth in the Merger Agreement, and each Employee Earn Out Recipient who holds Company RSUs will receive such
holder’s allocation of the Earn Out Shares (subject to a continuous employment requirement), (iv) each award of Company
Restricted Shares that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to
receive an award of restricted shares denominated in a number of PTAC Common Shares in the manner set forth in the Merger Agreement
and (v) each Employee Earn Out Recipient who holds Company Restricted Shares will receive such holder’s allocation of the
Earn Out Shares (subject to a continuous employment requirement).
Earn Out
At the closing of
the transactions contemplated by the Merger Agreement (the “Transactions,” and the closing, the “Closing”),
PTAC will also issue or cause to be issued to the Pre-Closing Holders of the Company an aggregate 5,000,000 restricted PTAC Common
Shares (subject to vesting, forfeiture and certain other restrictions (including on transfer) set forth in the Merger Agreement
(the “Earn Out Shares”). With respect to the Earn Out Shares: (i) one-third (1/3) of the Earn Out Shares will
vest if the closing price of the PTAC Common Shares is greater than or equal to $18.00 over any twenty (20) Trading Days (as defined
in the Merger Agreement) within any thirty (30) consecutive Trading Day period, (ii) one-third (1/3) of the Earn Out Shares will
vest if the closing price of the PTAC Common Shares is greater than or equal to $20.00 over any twenty (20) Trading Days within
any thirty (30) consecutive Trading Day period, and (iii) one-third (1/3) of the Earn Out Shares will vest if the closing price
of the PTAC Common Shares is greater than or equal to $22.00 over any twenty (20) Trading Days within any thirty (30) consecutive
Trading Day period, in each case, prior to the expiry of three (3) years from the Closing (the “Earn Out Period”).
In addition, if there is a sale of PTAC prior to the expiration of the Earn Out Period that will result in the holders of PTAC
Common Shares receiving a price per share equal to or in excess of the applicable price per share thresholds described above,
then Earn Out Shares will vest in connection with such sale of the Company in the manner set forth in the Merger Agreement.
Representations and Warranties
The Merger Agreement
contains customary representations and warranties of the parties thereto with respect to, among other things, (a) entity organization,
formation and authority, (b) capital structure, (c) authorization to enter into the Merger Agreement, (d) licenses and permits,
(e) taxes, (f) financial statements, (g) real property, (h) material contracts, (i) title to assets, (j) absence of changes, (k)
employee matters, (l) compliance with laws, (m) litigation, (n) transactions with affiliates and (o) regulatory matters. The representations
and warranties do not survive the Closing.
Covenants
The Merger Agreement
includes customary covenants of the Company with respect to operation of the business prior to consummation of the Transactions.
The Merger Agreement also contains additional covenants of the parties, including, among others, (a) requirement to make appropriate
filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”), (b) the use
of reasonable best efforts to obtain the financing from the PIPE Investors (as defined below) (and for the Company to reasonably
cooperate with PTAC in connection thereto) and (c) preparation and filing of a registration statement on Form S-4 relating to
the Transactions and containing a proxy statement of PTAC (the “Registration Statement / Proxy Statement”).
The Merger Agreement
also contains customary exclusivity provisions prohibiting (a) the Company and its subsidiaries from initiating, soliciting, entertaining
or otherwise encouraging an Acquisition Proposal (as defined in the Merger Agreement) (subject to limited exceptions specified
therein) or entering into any contracts or agreements in connection therewith and (b) PTAC from issuing an indication of interest,
memorandum of understanding, letter of intent or other similar agreement with respect to a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination other that with respect to the transactions with the
Company contemplated by the Merger Agreement.
New Incentive Plan
In connection with
the Closing, PTAC will adopt the New Incentive Plan (as defined in the Merger Agreement) subject to the receipt of PTAC stockholder
approval.
Conditions to Consummation of the Transactions
Consummation of the
Transactions is generally subject to customary conditions of the respective parties, and conditions customary to special purpose
acquisition companies, including (a) expiry or termination of all applicable waiting periods under HSR, (b) the absence of
any law or governmental order preventing the consummation of the Transactions, (c) the effectiveness of the Registration Statement
/ Proxy Statement, (d) the PTAC Class A Shares to be issued (including the Earn Out Shares) having been listed on Nasdaq upon
the Closing and (e) receipt of shareholder approval from shareholders of each of PTAC and the Company for consummation of the
Transactions. In addition, the Company also has the right to not consummate the Merger in the event the aggregate cash proceeds
available in PTAC’s trust account, together with the cash proceeds received by PTAC at Closing in respect of the various
financing transactions contemplated by the Merger Agreement (including financing from the PIPE Investors), is less than $100,000,000
(after giving effect to payments in respect of redemptions).
Termination
The Merger Agreement
may be terminated under certain customary and limited circumstances at any time prior to the Closing, including by mutual written
consent or if the Transactions have not been consummated on or prior to December 31, 2020 (subject to extensions for delays as
set forth in the Merger Agreement).
A copy of the Merger
Agreement is filed with this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference. The foregoing
description of the Merger Agreement and the Transactions is not complete and is subject to, and qualified in its entirety by,
reference to the actual agreement. The Merger Agreement contains representations, warranties and covenants that the respective
Parties made to each other as of the date of the Merger Agreement or other specific dates. The assertions embodied in those representations,
warranties and covenants were made for purposes of the contract among the respective Parties and are subject to important qualifications
and limitations agreed to by the Parties in connection with negotiating such agreement. In particular, the assertions embodied
in the representations and warranties in the Merger Agreement were made as of a specified date, are modified or qualified by information
in one or more confidential disclosure letters prepared in connection with the execution and delivery of the Merger Agreement,
may be subject to a contractual standard of materiality different from what might be viewed as material to investors, or may have
been used for the purpose of allocating risk between the Parties. Accordingly, the representations and warranties in the Merger
Agreement are not necessarily characterizations of the actual state of facts about PTAC, the Company or the other Parties at the
time they were made or otherwise and should only be read in conjunction with the other information that PTAC makes publicly available
in reports, statements and other documents filed with the SEC.
Support Agreements
In connection with
the execution of the Merger Agreement, certain holders representing at least a majority of each of the Company Preferred Stock,
Series B Preferred Stock of the Company and a majority of the Company Common Stock (determined on an as-converted basis) have
entered into voting and support agreements (the “Support Agreements”) with PTAC, along with irrevocable written
consents to convert all of the Company Preferred Stock to Company Common Stock prior to the Closing. The Support Agreements provide
for, among other things, that the stockholders of the Company party thereto will vote their respective equity securities in the
Company in favor of the Merger Agreement and the consummation of the transactions contemplated thereby.
A copy of the form of Support
Agreement is filed with this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference, and may include
such changes as are negotiated between the parties thereto. The foregoing description of the Support Agreement is not complete
and is subject to, and qualified in its entirety by, reference to the form thereof filed herewith.
PIPE Financing
On July 30, 2020,
PTAC entered into subscription agreements (each, a “Subscription Agreement”) with certain investors (the
“PIPE Investors”) pursuant to which, among other things, the PIPE Investors have agreed to subscribe for
and purchase, and PTAC has agreed to issue and sell to the PIPE Investors, an aggregate of 15,000,000 PTAC Common Shares for
an aggregate purchase price of $150,000,000.00 on the date of Closing, on the terms and subject to the conditions set forth
therein. The Subscription Agreement contains customary representations and warranties of the Company, on the one hand, and
each PIPE Investor, on the other hand, and customary conditions to closing, including the consummation of the Transactions.
The form of the Subscription Agreement is attached as Exhibit 10.2 hereto and is incorporated herein by reference. The
foregoing description of the Subscription Agreement is not complete and is subject to, and qualified in its entirety by,
reference to the form filed herewith.